According to domestic cryptocurrency exchanges Unocoin and Zebpay, Bengaluru ranks among the top five cities in the country for transactions and interest levels in digital currencies, alongside Mumbai, Delhi, Ahmedabad and PuneIpsita Basu | ET Bureau | Updated: September 18, 2017, 11:42 IST

Halim, a blockchain developer, got his first bitcoin in 2015. The 23-year-old from a family of gold merchants prefers to invest in cryptocurrencies as returns on traditional investments don't excite him anymore.

Halim, who put his money in Ether (another cryptocurrency) in January, has witnessed a 600% increase on his investment. “Double-digit growth rates make me laugh now. Consider this: if you had invested $300 in bitcoins in 2011, that would be worth about $1.5 million now,“ he says.

The boom of cryptocurrencies has caught the fancy of many in the country's tech capital. According to domestic cryptocurrency exchanges Unocoin and Zebpay, Bengaluru ranks among the top five cities in the country for transactions and interest levels in digital currencies, alongside Mumbai, Delhi, Ahmedabad and Pune. The reason: Bengaluru's tech-driven millennials with an appetite for high risk.

“Mutual funds are hard to understand. Gold and silver need physical storage, which is difficult considering most millennials in Bengaluru are immigrants and live in rented homes. And down payments for real estate are out of reach for most,“ says blockchain consultant Ankit Malik.

Blockchain, a public database or ledger to record digital transactions forms the backbone of cryptocurrencies.

ET reported on Saturday that although the bitcoin-rupee swap rate had recently gone into a freefall after regulators in China forced BTC China, one of the world's biggest exchanges for the digital currency, to down shutters, investors in India remained unfazed. The swap value has dropped to Rs 2.2 lakh per bitcoin from Rs 3.44 lakh more than two weeks ago according to dealers.

According to Bengaluru-based Unocoin that began operations in 2013, the past eight months have been exceptional in terms of interest in crypto currencies.

“In 2016, we had 130,000 users. But in the past couple of months, we have reached closer to 500,000 users,“ say Sathvik Vishwanath, co-founder of Unocoin. He attributes this to increased awareness and interest in cryptocurrencies among young investors (particularly in the 22-35 age groups) with disposable incomes

“From Bengaluru, we see 150 to 20 trades a day with average values ranging between Rs 30,000 and Rs 60,000 which includes buying and selling cryptocurrencies,“ Vishwanath adds.

Chocolatier Urmila recently invested in bitcoins after dissolving her fixed deposits. “The returns have so far been much higher than shares, real estate or gold,“ says Urmila. “But every investment has certain pitfalls. One must be aware of the risk of price volatility in cryptocurrencies.“

The lack of government regulations and the high risks involved are a deterrent for many. Investors recommend a clear classification on digital, currencies such as in Japan, which in April declared bitcoin a currency. Sumukh Shetty, co-founder, ezether.com, a Ether exchange platform “If India can draft regulations like Singapore and Switzerland, it can lead to cutting edge blockchain startups and innovative technology companies.”

Currently, exchanges or platforms that allow people to trade in cryptocurrencies self-regulate. “To keep our transactions clean, we ask customers to provide their bank and KYC documents. Depending on the volume of a trade, we go in for stricter rules on identity proofs,“ says Saurabh Agrawal, cofounder of ZebPay, an app-enabled bitcoin wallet provider.

In the long run, Agrawal hopes the government will implement regulations for cryptocurrencies and establish a regulatory body that will require all digital currency exchanges to register with it and ensure minimum security standards and consumer protection-friendly laws for the industry to grow.